John At The Center

Sovereign wealth funds are on the prowl again as they research deals and begin planning their next moves, Fortune reported.

R.P. Eddy, C.E.O. of research firm Ergo, told Fortune, “They’re standing on the edge of the pool and waiting to see who’s going to jump in first.”

via Sovereign Wealth Funds Back on the Prowl – DealBook Blog – NYTimes.com.

Thus, while the recent downward tick in the unemployment rate is good news, certainly better than an uptick, we should be prepared for the possibility that the pattern in the last recession might repeat itself and unemployment will head back upward for several more months before it reaches its peak.

via Economist’s View: Unemployment and Excess Capacity.

In other words, Mr. Bernanke’s key audiences – in financial markets – do not find him credible on the central issue of the day, presumably because he is unwilling to condone measures that would ensure today’s massive banks become “small enough to fail.” If potential creditors do not fear losses, they will provide funds on easy terms to our big banks and we will re-run some version of our previous bubble. This is how our financial system works.

via Should Ben Bernanke Be Reconfirmed? « The Baseline Scenario.

The latter point should be of greatest concern. Retailers have so far avoided the panic sales of last year by trimming inventory. Planned sales offer 30-40 per cent off, rather than 70 per cent, and retailers are making greater use of offers that stimulate additional spending. But consumers are becoming conditioned to lower prices just as smartphones will make online price comparisons ever easier. Margins will become harder to protect without sales growth, which requires a better-than-lacklustre economic recovery.

So equity investors should consider that earnings for consumer discretionary stocks typically rebound the strongest for any sector – by an average two-thirds for the last five recessions, calculates Barclays Capital. If Americans are becoming more frugal, expectations for recovery may be rather too optimistic.

via FT.com / Lex / Consumer & Retail – US retail.

The global IPO market has been more lemon than lemonade in recent years. But even as the U.S. market shows some signs of life, venture capital investors in China are souring on U.S. exchanges and turning instead to domestic markets and Hong Kong for their exits.Investors with U.S. venture capital firms like New Enterprise Associates and VantagePoint Venture Partners that are active in China said that with all of the activity and excitement surrounding Hong Kong’s market and the Chinext – Shenzhen, China’s new growth equity market – U.S. exits don’t hold the same appeal.

via Chinese Start-Ups Turn Up Noses At U.S. IPOs, Exiting Close To Home – Venture Capital Dispatch – WSJ.

Pimco Takes Lead As Biggest Mutual Fund – DealBook Blog – NYTimes.com.

According to the Stock Trader’s Almanac, the January effect is the historical tendency of small-caps to outperform large-caps from mid December until April

via StockCharts Blogs – ChartWatchers – The January effect starts early.

I’m wagering we’re about to enter a similar period in 2010. The last one was initiated by the Netscape IPO, one of the first commercial browser makers. Its IPO, less than two years after the company was founded, triggered an avalanche of similar offerings, and thus helped cause the dot-com episode that characterized the market’s madness of the late-1990s. All it would take to make it happen again is another Netscape moment, as it were.

And what is a Netscape moment? It’s not just a moonshot IPO from a fast-growing company with all the right moves. It’s also a company that represents a cohort of IPO-able fast-growers, any one of which bankers can track down and take public once the initial companies are successfully public. “Get me another one of those!”, is what investors (and bank executives) will say to investment bankers after the first company in the cohort goes public. And bankers can be criticized for many things, but being slow to follow profitable orders is not one of them.

via Netscape, Yelp, and the Tech IPO Boom of 2010.

In China, however, “flipping” is not the problem. Some people may be engaged in short-term ”flipping,” but as I’ve described in my FEER article “China’s Real Estate Riddle,” a lot more are buying residences — in many cases multiple units — and holding them vacant indefinitely as an unproductive ”store of value,” like gold.

via More Evidence of Froth in China’s Housing Market « naked capitalism.

Litterman is considered one of the grandfathers of modern quant trading. With Fischer Black, He developed the “Black-Litterman asset allocation model,” which is widely used by institutional investors to overcome certain problems in applying modern portfolio theory.

via Goldman Quant Bob Litterman Retiring.